global banking and markets investor update 2017 - hsbc · banking industry wholesale revenues...

15 June 2017

Global Banking and MarketsInvestor Update 2017

2

Important notice and forward-looking statements

Important notice

The information set out in this presentation and subsequent discussion does not constitute a public offer for the purposes of any applicable law or an offer to sell

or solicitation of any offer to purchase any securities or other financial instruments or any recommendation in respect of such securities or instruments.

Forward-looking statements

This presentation and subsequent discussion may contain projections, estimates, forecasts, targets, opinions, prospects, results, returns and forward-looking

statements with respect to the financial condition, results of operations, capital position and business of HSBC Holdings plc (the “Group”) (together, “forward-

looking statements”). Any such forward-looking statements are not a reliable indicator of future performance, as they may involve significant assumptions and

subjective judgements which may or may not prove to be correct and there can be no assurance that any of the matters set out in forward-looking statements are

attainable, will actually occur or will be realised or are complete or accurate. Forward-looking statements are statements about the future and are inherently

uncertain and generally based on stated or implied assumptions. The assumptions may prove to be incorrect and involve known and unknown risks,

uncertainties, contingencies and other important factors, many of which are outside the control of the Group. Actual achievements, results, performance or other

future events or conditions may differ materially from those stated, implied and/or reflected in any forward-looking statements due to a variety of risks,

uncertainties and other factors (including without limitation those which are referable to general market conditions or regulatory changes). There can be no

assurance that any of the matters set out in forward-looking statements are attainable, will actually occur or will be realised or are complete or accurate. Certain

of the definitions, assumptions and judgements upon which forward-looking statements contained herein are based are discussed under "Basis of Preparation"

within this document. A variety of additional risks and uncertainties that could cause actual results to differ materially from those expected or anticipated, including

those that are described in the Group’s Annual Report on Form 20-F for the year ended 31 December 2016 filed with the US Securities and Exchange

Commission and other reports and filings of the Group, including under the headings ‘Top and Emerging Risks’ and ‘Risk Factors’ and in Note 35 (Legal

proceedings and regulatory matters) and other notes to the financial statements included therein. Any such forward-looking statements are based on the beliefs,

expectations and opinions of the Group at the date the statements are made, and the Group does not assume, and hereby disclaims, any obligation or duty to

update them if circumstances or management’s beliefs, expectations or opinions should change. For these reasons, recipients should not place reliance on, and

are cautioned about relying on, any forward-looking statements.

Non-GAAP Financial Information

This presentation contains non-GAAP financial information. The primary non-GAAP financial measure we use is ‘adjusted performance’ which is computed by

adjusting reported results for the period-on-period effects of foreign currency translation differences and significant items which distort period-on-period

comparisons. Significant items are those items which management and investors would ordinarily identify and consider separately when assessing performance

in order to better understand the underlying trends in the business. Reconciliations between non-GAAP financial measurements and the most directly comparable

measures under GAAP are provided in the HSBC Holdings plc Annual Report and Accounts 2016 and the ‘Reconciliations of Non-GAAP Financial Measures’

document, both of which are available at www.hsbc.com. Note, however, that the global businesses are considered our reportable segments under IFRS 8 and

their results are assessed by the chief operating decision maker on the basis of adjusted performance. We therefore present these results on an adjusted basis

as required by IFRS. Reconciliations from reported to adjusted results by global business are presented for information purposes only.

http://www.hsbc.com/

Agenda for the dayGB&M Investor Update

1

Appendix

Introduction

Q&A

Lunch

GB&M clients and businesses


Break

Industry and Global Banking & Markets overview

Outlook3

2

9:35AM – 9:40AM

11:20AM – 11:45PM

10:20AM – 10:40AM

9:40AM – 10:00AM

11:45PM – 1:00PM

11:00AM – 11:20AM

10:00AM – 10:20AM

10:40AM – 11:00AM

Presenters

Samir Assaf and

Gerard Mattia

Business Heads:

Robin Phillips,

Matthew Westerman

Diane Reyes,

Thibaut De Roux,

and Cian Burke

Samir Assaf and

Gerard Mattia

4

Progress since June 2015 Investor UpdateGB&M Investor Update

1. Previously defined as Client Facing GB&M in 2015 Investor Update2. June 2015 Investor update gross reduction of US$140bn updated to US$100bn and net reduction of US$130bn updated to US$64bn as legacy credit has moved to Corporate Centre, re-segmentation and adjusted at 1Q17 FX rate3. Legacy now reported in Corporate Centre4. Certain internal costs with the Group are now allocated to Global Businesses, notably the cost of MREL debt and Corporate Centre costs. The RoRWA including these allocations would be 2.2%

Major Strategic

actionsOutcome by 2017 Progress so far

Actions to return to Group target profitability

Reduce RWAs

GB&M1 - gross reduction US$100bn2

and net reduction US$64bn

Legacy - gross US$40bn reduction

GB&M - US$99bn gross reduction and net

US$56bn as of 1Q17

Legacy - US$23bn gross reduction as of 1Q173

Keep costs flat US$1.1bn in run rate savings

c.US$500m run rate savings by end 2016

On track to deliver US$1.1bn in run rate

savings by end 2017

Revenuegrowth

Mid-single digit revenue growth from

2014 to 2017 CAGR 5% CAGR from 2014 to 2016

RoRWA 2.5% RoRWA4 1Q17 RoRWA of 2.3%

1

5

Distinctive business modelGB&M Investor Update

1. Gross RWA reduction2. Certain internal costs with the Group are now allocated to Global Businesses, notably the cost of MREL debt and Corporate Centre costs. The RoRWA including these allocations would be 2.2%

Re-affirming investor commitments

RoRWA > 2.5%2

Further US$20bn+ RWA

reduction1

Positive adjusted Jaws

Mid single digit growth

2

Returns

Capital

Operating

Costs

Revenue

Client-base with equal mix of

corporates and financial

institutions

Diversified and broad wholesale

product offering

Diversified global footprint geared

to growth markets

Distinctive GB&M business model

Greater revenue

predictability given

relatively low volatility

Historical growth

outperforming the peer

group




Appendix

Introduction

Q&A

Break

Industry and Global Banking & Markets overview1

Lunch

Outlook3

2

9:35AM – 9:40AM

11:20AM – 11:45PM

10:20AM – 10:40AM

9:40AM – 10:00AM

11:45PM – 1:00PM

11:00AM – 11:20AM

10:00AM – 10:20AM

10:40AM – 11:00AM

Presenters

Samir Assaf

Chief Executive Officer

Global Banking & Markets

Gerard Mattia

Chief Finance Officer


8

Banking industry wholesale revenues forecast to grow with improving returns

Industry

Source: Oliver Wyman analysis1. Revenue pools include FICC and Equities Sales & Trading revenues, Investment Banking, Transaction Banking, Security Services and Lending. Client scope includes all Corporate clients >$500m turnover, Institutional and public

Sector clients. Excludes fines and non-core businesses, write downs, CVA and DVA charges2. Return on equity is shown post-tax (32% tax rate assumed)

Banking Industry wholesale Revenue1

2014-20F, US$bn

Banking Industry wholesale RoE2

2014-16, %

2016

11%

2015

10%

2014

10%755730740

+3% CAGR

2020F201620152014

3

9

Regulatory changes – post-crisis policies near finalisationIndustry

Structural

Reform and

Resolution

Execution

and clearing

Capital and

liquidity

Regulatory change outlook

UK ring-fencing - 2019

Brexit - 2019

Dodd-Frank/Volcker – under review

Recovery & Resolution

Minimum Requirement for own funds and Eligible Liabilities (MREL)

Execution and clearing regulations1 – largely embedded

Trade reporting regulations2 – largely embedded

Margin requirements for uncleared derivatives – phase-in

Net Stable Funding Ratio (NSFR)

Fundamental Review of the Trading Book (FRTB)

Standardised Approach to Counterparty Credit Risk (SACCR)

IFRS 9

1. Markets in Financial Investments - MiFID II, European Markets Infrastructure Regulation and Dodd-Frank

2. Markets in Financial Investments - MiFID II 4

10

GB&M represents circa one third of HSBC Group

Note: Numbers may not add up due to rounding1. On an adjusted basis as disclosed in the HSBC Holdings plc Annual Report and Accounts 20162. GB&M External assets after derivative netting. For further details see appendix

Revenue1

2016 – US$

Profit Before Tax1

2016 – US$

30%

GB&M

14.9bn

29%

GB&M

8.9bn

29%

GB&M

5.6bn

35%

GB&M

300bn

LICs1

2016 – US$

Operating Costs1

2016 – US$

RWAs

2016 – US$

17%

GB&M

0.5bn

GB&MGroup excl. GB&M

31%

GB&M

663bn

External Assets2

2016 – US$

Further asset break-down

provided in Appendix

GB&M – Part of HSBC Group

5

11

GB&M is focused where it has sustainable competitive advantages

Global Markets1

Financing & Advisory4

Global Liquidity & Cash Management2

Securities Services5

c.90%

c.10%

Industry

Revenue

Pool

c.228bn3

c.50%

c.50%

Industry

Revenue

Pool

c.75bn

c.50%

c.50%

Industry

AUC

c.156tn

2016 – US$ 2016 – US$

2016 – US$ 2016 – US$

c.90%

c.10%

Industry

Revenue

Pool

c.130bn

HSBC GB&M focus areas

6

Industry/GB&M

1. Source: Coalition. Peer group: Bank of America Merrill Lynch, Barclays, BNPP, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley, Société Générale and UBS. Coalition results are based upon HSBC’s product taxonomy and include all Institutional clients and Corporates with a turnover of greater than US$1.5bn. HSBC GB&M focus areas refers to Global revenues ex Japan, ex America Cash Equities and Core Prime Brokerage and ex Australia and New Zealand Equities

2. Source: Oliver Wyman 2016 analysis. HSBC GB&M focus areas refers to Europe, Americas (Canada, US, Mexico, Argentina, Chile and Uruguay), Asia and MENA, excludes Africa3. Source: Oliver Wyman; Total market refers to 2016 revenues including Payments, Receivables / Collections, Commercial Cards, Interest income, Liquidity Management and Account Management. Does not include payments linked FX4. Source: Dealogic Global IB Adjusted Fee League tables 2016; HSBC GB&M focus areas exclude: M&A - fees originating from US, Japan & Australia; ECM - US, Japan, Australia, Canada & China A Shares; DCM - Japan & Chinese

Onshore; LOAN - US & Japan5. Source: EY and internal HSBC analysis 2016; HSBC GB&M focus areas refer to global AuC excluding US domestic market and Africa

12

Sustainable competitive advantages generating historically stable and recurring revenues

GB&M - Competitive advantages

Note: Numbers may not add up due to rounding1. HSBC internal client MI, 2014-16 average2. On an adjusted basis as disclosed in the HSBC Holdings plc Annual Report and Accounts 2014-16 average excludes Credit and Funding Valuation adjustments 3. As relates to Global Banking in the Management View of Adjusted Revenue in the HSBC Holdings plc Annual Report and Accounts 20164. Other includes Principal Investments and Other

Group Advantages GB&M Advantages

Balance Sheet

Strength

Clients1

Client-base with equal

mix of corporates and

financial institutions

1

Strong capital

position, highly liquid

and highly rated

Geographies2

Diversified footprint

geared to growth markets

3

Universal Banking

Model

Four global

businesses

International Network

International network

covers >90% of

global trade and

capital flows

Products2

Diversified and broad

wholesale product

offering

2

Public Sector

Corporates

Hedge Funds & Others

Banks & Insurers

Asset Managers

19%

5%

2%

26%16%

11%

8%

13%

Foreign Exchange

Rates & Credit

Global Trade &

Receivables Finance

Other4

Securities Services

Equities

Global Liquidity &

Cash Management

Financing &

Advisory3

15%

6%

37%

2%40%

MENA

Europe

Latin AmericaAsia

North America

c.5%

GB&M revenue, 2014–16 average

+

7

c.10%

c.25%c.50%

c.10%

13

Client-base with equal mix of corporates and financial institutionsClients

1. Source: Oliver Wyman analysis based on top 10 Corporate and Investment Bank peer group2. HSBC internal client MI

HSBC GB&M2Top 10 CIB1

GB&M client distribution by revenue

2016

1

Top 8 Corporate Segments2

% of Corporate revenue

Top 8 Financial Institution Segments2

% of Financial Institution revenue

Other sectors

Power & Utilities

Infrastructure

Transport & Logistics

Real Estate

Oil & Gas

Telecoms, Media & Technology

Capital Goods & Automotives

Consumer & Retail

Central Banks & Monetary Authorities

Governments & Public Sector

Securities & Group Finance Companies

Sovereign Wealth & Public Funds

Hedge Funds

Insurance

Asset Managers & Pension Funds

Banks

8

Corporates

Financial

Institutions

Product Distribution2

Fixed

Income

Equities

Financing

& Advisory

Global Liquidity &

Cash Management

Foreign Exchange

Asset

Management

Global Trade &

Receivables

Finance

Securities

Services

14

Distinctive universal model and international network creates revenue synergies

Clients

Note: Numbers may not add due to rounding1. Cross-business synergies are presented as gross revenue and do not reflect any revenue sharing arrangement between Global Businesses2. In-business synergies include separately managed operations that are reported within a global business line3. GLCM is now managed under GB&M. The GB&M portion is included as a revenue synergy to be consistent with the treatment of GTRF

GB&M enabled revenue synergies

US$bn Definition

7.8

7.0

3.5

Cross-

Business

In-Business2

GB&M

enabled

Group

10.5

1

Total revenue synergies by Global

Business

Revenue1 2016, US$bn

2.1

1.1

1.6

7.8

2.7

Total

In-business synergies

GB&M clients

to/from GPB0.1

GB&M products

with RBWM clients

GB&M products

with CMB clients

GB&M clients with

RBWM products0.3

GB&M clients

with GLCM and GTRF

FX, derivatives and capital

financing from GB&M

Asset Management from

RBWM

Global Liquidity and Cash

Management 3

Global Trade and

Receivables Finance

Global Markets products

from GB&M

Client referrals from GB&M

Global Markets and Global

Banking products to GPB

9

15

Broad wholesale product suite helps enable deep client relationshipsProducts

1. Includes Debt Capital Markets, Mergers & Acquisitions, Equity Capital Markets, Infrastructure & Real Estate and Structured Finance2. HSBC internal client MI

>64-6

c.4x

<4

1x

Client revenue multiplier by number of products2

2016, # of products

>10x

2

c.-6% c.+3% c.+8%

c.35% c.40% c.25%Client distribution per

number of products

Securities

Services

Rates &

CreditEquities Lending

Liquidity

& Cash

Management

Trade &

Receivables

Finance

Foreign

Exchange

Financing &

Advisory1

(ex. Lending)

Change in number of clients

2014-16 CAGR (%)

Product building blocks

10

16

Diversified product offering distinct from our peersProducts

1. HSBC Management View of Adjusted Revenue as reported in the 2016 HSBC Holdings plc Annual Report and Accounts2. Universal banks comprise JP Morgan, Citi (excluding private bank), Bank of America, Deutsche Bank, Barclays, BNPP and Societe Generale. Dec16 spot rate was used to translate European peers results to US$3. Investment banks comprise Goldman Sachs, Morgan Stanley, Credit Suisse and UBS. Dec16 spot rate was used to translate European peers results to US$4. Foreign Exchange and Fixed Income split based on Coalition analysis. Peer group: Bank of America Merrill Lynch, Barclays, BNPP, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley,

Société Générale and UBS. Coalition results are based upon HSBC’s product taxonomy and include all Institutional clients and Corporates with a turnover of greater than US$1.5bn5. Fixed Income includes revenue from Rates and CreditSource for Universal Banks and Investment Banks: Peers Annual Reports and Accounts. Total Operating Income (TOI) where available or Net Operating Income where TOI not available

26%

27%

29%28%

22%

7%

20%

19%

Investment

Banks

Average3

Universal

Banks

Average2

HSBC

GB&M1

3%

Revenue split by Products against peers

2016

Foreign Exchange

Rates

Credit

Equities

Lending

Advisory & Origination

Global Liquidity & Cash Management

Securities Services

Global Trade & Receivables Finance

2

Global Markets

Financing & Advisory

Transaction Banking

Other

Equities

Fixed Income 4,5

Foreign Exchange4

Financing & Advisory

Transaction

Banking

Fixed Income46%

51% 66%

11

17

Focused strategy has resulted in a top 5 market positions driving c.70% of revenue

100%

No market

share available2

Outside Top 10

c.10%

Top 10

c.20%

Top 5

c.20%

Top 3

c.50%

2016

c.70% of adjusted revenue Example Top 3 and Top 5 positions

GB&M: revenue1 by product by market rank

%

Globally

Top 3

Asia ex

Japan

Top 3

EMEA

Top 3

Note: Figures may not add due to rounding1. HSBC Management View of Adjusted Revenue as reported in the 2016 HSBC Holdings plc Annual Report and Accounts2. Includes Principal Investments, Credit and Funding Valuation Adjustments and Other

2 Products

Americas

Top 5

Sources:• FX, Rates, Credit and Equities – Coalition FY16. Peer group: Bank of America Merrill Lynch, Barclays, BNPP, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley, Société

Générale and UBS. Coalition results are based upon HSBC’s product taxonomy and include all Institutional clients and Corporates with a turnover of greater than US$1.5bn• M&A, ECM, DCM and Lending – Dealogic Global IB Adjusted Fee League tables 2016• GLCM and GTRF – Oliver Wyman 2016• HSS – Europe: EY 2016, based on AUC and AUA. Asia: EY 2016 analysis, MENA: The Asset Triple A Asset Servicing Awards 2016 - Best Custody Specialist Award & Best Subcustodian,

Global Investor - ISF MENA Awards 2016 - Regional Fund Administrator of the Year

12

#1 GTRF

#2 Foreign Exchange

#3 GLCM

#1 DCM, GLCM, GTRF &

Securities Services

#2 Foreign Exchange, Rates

#3 Syndicated Loans

#1 DCM, GLCM & GTRF

#2 Foreign Exchange

#4 Foreign Exchange

18

Distinctive network enables us to serve the largest global clientsGeographies

Source: HSBC internal client MI

3

4 or more

c.50%

3 regions

c.25%

4 or more countries

in 1 region or

booking in 2 regions

c.15%

3 or fewer countries

in 1 Region

c.10%

Accessible to local banks

Accessible to regional banks

Accessible to international banks

Accessible to GLOBAL banks

GB&M client revenue by number of countries/regions

2016, %

13

19

More than half of GB&M revenue is cross-borderGeographies

Source: HSBC internal client MI

Cross-border client revenue along major corridors

% of Global GB&M cross-border revenue, 2016

3

c.10%

c.30%

North America

c.5% c.5%Latin America

c.10%c.5%MENA

c.35%c.35%

Europe

c.40%c.25%

Asia

2016

Cross-

border

In-country

Outbound total = 100% Inbound total = 100%

14

20

Geographic footprint geared towards faster growing marketsGeographies

Sources: 1. Nominal GDP growth; Source: Global Insights. Note: Excludes Commonwealth of Independent States and Sub-Saharan Africa2. Merchandise imports plus exports; Source: Global Insights. Note: Excludes Commonwealth of Independent States and Sub-Saharan Africa3. As disclosed in the 2016 HSBC GB&M Factbook

Global GDP1

US$tn

Global trade2

US$tn

3

GB&M Revenue3

US$bn

26%

4%

34%

29%

7%

7%

5%

41%

2030

160

North America

Europe

Latin America

MENA

Asia

70

23%

22%

2016

15%

38%

7%

6%

34%

29

20302016

35%

6%

8%

12%

39%

69

5%

5%

6%

8%

6%

6%

7%

% CAGR %

8% 8%

5%

37%

15%

3%

7%

38%

15

2016

15

21

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 1Q 174Q

Historically stable and recurring revenue with low volatility

1. GB&M Adjusted Revenue, translated at 1Q17 FX rates, post-Corporate Centre resegmentationSource: HSBC Management View of Adjusted Revenue as reported in the 2014-2016 HSBC Holdings plc Annual Report and Accounts

Quarterly GB&M Revenue1

Total GB&M revenue

quarterly average

Stable GB&M revenue

quarterly average

Event driven & cyclical, including Credit and Funding Valuation adjustments

Stable & recurring

c.30% Revenue

‒ Equities

‒ M&A

‒ Rates & Credit

‒ ECM

‒ Principal Investments

‒ Other Revenue

c.70% Revenue

‒ FX

‒ Lending

‒ DCM

‒ Global Liquidity & Cash

Management

‒ Global Trade & Receivables

Finance

‒ Securities Services

2014 2015 2016

REVENUE STABILITY

16

Total Revenue excluding Credit and Funding Valuation adjustments

22

353025 55504540

17

16

15

10

9

8

7

100

11

12

13

14

Historically predictable revenue driven by relatively low volatility

1. Volatility: calculated as standard deviation of the total operating income over the mean of the period (13 consecutive quarters from 1Q14 to 1Q17) 2. Revenue based on disclosed total operating income. Net operating income used where total operating income not available3. US Universal Banks comprise: JP Morgan, Citi (excluding private bank) and Bank of America. US Investment Banks comprise: Goldman Sachs and Morgan Stanley. EU Universal Banks comprise: Barclays,

Deutsche Bank, BNPP and Societe Generale. EU Investment Banks comprise Credit Suisse and UBS4. HSBC revenues on an adjusted basis as disclosed in the HSBC Holdings plc Annual Report and Accounts 20165. HSBC revenues on an adjusted basis as disclosed in the HSBC Holdings plc Annual Report and Accounts 2016. Excluding Credit and Funding Valuation adjustments (CFV adjustments)

%

1Q14 – 1Q17 Quarterly volatility peer comparison1,2

REVENUE STABILITY

Low Volatility – Low Share of Group

17

US Investment Banks3

US Universal Banks3

EU Investment Banks3

EU Universal Banks3

HSBC4

HSBC exc. CFV adj. 5

Average

Average

GB&M Peer revenue equivalent quarterly volatility

(1Q14-1Q17)

GB&M Peer revenue equivalent % of

Total Group revenue (2016)

HSBC

ex CFV

Volatility based on adjusted

revenue

Volatility based on adjusted

revenue excluding CFV if

disclosed

23

Significantly outperforming our peer group historical growth

1. Source: Peers’ annual report accounts, HSBC analysis, wholesale division only2. US Universal banks comprise: JP Morgan, Citi (excluding private bank) and Bank of America. US Investment Banks comprise: Goldman Sachs and Morgan Stanley. EU Universal Banks comprise: Barclays,

Deutsche Bank, BNPP and Societe Generale. EU Investment Banks comprise Credit Suisse and UBS Net operating income used where total operating income not available

3. HSBC GB&M revenues on an adjusted basis as disclosed in the HSBC Holdings plc Annual Report and Accounts 20164. Source: Coalition. Peer group: Bank of America Merrill Lynch, Barclays, BNPP, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley, Société Générale and UBS. Coalition results are based upon

HSBC’s product taxonomy and include all Institutional clients and Corporates with a turnover of greater than US$1.5bn5. As relates to Global Banking in the Management View of Adjusted Revenue in the HSBC Holdings plc Annual Report and Accounts 2016

REVENUE GROWTH

-7.8%

0.6%

US

Investment

Banks2

-3.3%

EU

Investment

Banks2

US

Universal

Banks2

1.3%

HSBC

GB&M3

4.8%

EU

Universal

Banks2

Peer average: -0.8%

Peer Revenue Growth Comparison1

Growth CAGR 2014-16, %

Main drivers of growth

Global Markets – Fixed Income, Europe

Global Liquidity & Cash Management

Financing & Advisory5

HSBC Market Share

Corporate & Investment Banking4, %

7.57.1

6.3

2014 2016

+120bps

2015

18




Appendix

Introduction

Q&A

Break


Lunch

Outlook3

2

9:35AM – 9:40AM

11:20AM – 11:45PM

10:20AM – 10:40AM

9:40AM – 10:00AM

11:45PM – 1:00PM

11:00AM – 11:20AM

10:00AM – 10:20AM

10:40AM – 11:00AM

Presenters

Robin Phillips

Co-Head of

Global Banking

Thibaut De Roux

Global Head of

Markets

Diane Reyes

Global Head of Global

Liquidity & Cash Management

Matthew Westerman

Co-Head of

Global Banking

Cian Burke

Global Head of

HSBC Securities Services

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=imgres&cd=&cad=rja&uact=8&ved=0ahUKEwi1urO79LrUAhUFkRQKHWsvDbAQjRwIBw&url=http://www.euromoney.com/Article/3531926/Westerman-joins-from-Goldman-as-HSBC-rejigs-global-banking-management.html&psig=AFQjCNEVl1P73-BbTZy3JR21hbeWJ6ecHA&ust=1497446340341961


https://www.globalcustodian.com/Custody/GC-legends-interview--HSBC-s-Cian-Burke/


26

Client coverage

GB&M has a client centric coverage model allowing us to serve our clients with more products in more countries

Global

Liquidity &

Cash

Management

Global

Markets

Securities

Services

Global

Relationship

Banker

Client

Lending

Financing &

Advisory

Collaboration

GB&M Products

Other Businesses

Products

Asset

Management3

Global Trade

&

Receivables

Finance2

>64-6<4

Single point of delivery for all Group products

4 or more3 regions4 or more

countries

in 1 region or

booking in 2

regions

3 or fewer

countries

in 1 Region

GB&M client revenue by number of countries /regions1

2016, %

1. HSBC internal client MI2. Managed by Commercial Banking (CMB)3. Managed by Retail Banking and Wealth Management (RBWM)

19

Client revenue multiplier by number of products1

2016, # of products

Global Relationship Bankers are the focal point of client

relationships – delivering all of HSBC’s products

Clients’ global networks supported by multinational

Relationship Managers in each location

27

GB&M clients are large multinational corporates and institutions Client coverage

1. Global average. Approximate thresholds, differs by country2. GB&M based on client master groups, RBWM is based on individual clients, CMB is an amalgamation of client master groups and Individual clients. Figures as of December 2016

Client profile # of clients2

Customer threshold1

US$

FinancialInstitutions

Multinational Corporates

Large Corporates, Mid-Market and SME

Retail and Wealth Customers

Commercial Banking

Retail Banking &

Wealth Management

< US$5bn

turnover1c.1.6m

Global Private Bank> US$3-5m

assets

< US$3-5m

assets

c.36m

>US$5bn

turnover1c.2k


c.2kAll Financial

Institutions

20

28

GB&M has a disciplined approach to capital allocationClient coverage

1. Relates to Global Banking as referenced in the HBSC Holdings plc Annual Report and Accounts 2016. Revenues are on an adjusted basis2. Gross RWA reductions from December 2014 to December 2016. As presented at June 2015 Investor day FX rate

20162014

Financing & Advisory1 RWAs US$bn

Revenue1, US$bn

c.-45bn2

20162014

Industry Awards

Most innovative investment bank from

Western Europe

Most innovative investment bank for

bonds

Most innovative investment bank for

emerging markets

World’s Best Investment Bank

World’s Best Bank For Corporates

Asia’s Best Bank For Financing

Track recordCapital allocation approach

21

+4% CAGR

Deal-by-deal reviews of new capital commitments

against hurdle rates

Guided by overall GB&M required return and assessed at

deal, client level

Client-by-client returns reviewed against hurdle rates

Ensuring that every dollar of committed capital is

tracked

Disciplined tracking of deal related revenues

+

+

29

Universal banking model enables us to provide solutions throughout the client lifecycle

Client coverage

Positioned to bank the client throughout its lifecycle, from basic banking services through to international cash

management and capital markets solutions

2015 2016 20172005

Became a client

Acted as lead financial adviser on the Syngenta acquisition

Sole global coordinator and sole underwriter of acquisition financing

Led several financing

transactions and bond offerings

Transfer to GB&M

Banking relationship extended to 20+ countries

Provided financing for Pirelli acquisition

Case study 1

Provided cash management, credit & lending, forex, trade

through 10+ countriesSenior level coverage from

Chemicals sector team

22

Case study 2

2011

Led refinancing

2012

Became facility agent;

mandated on bond offering

2008

Supported buy-out by Doughty Hanson

2014

Opened global cash pool across 30+ countries

2016

Co-Led refinancing

2006

Became a client

Provided WC and settlement

lines

2017

TMF appointed advisers to assist the Board with assessing strategic and

financial options

30

Growth opportunity in Asia and Americas and well positioned in Europe despite ring-fencing and Brexit

Regions – Outlook

Asia

Europe,

Middle East

and

North Africa

North America

and

Latin America

Trends Initiatives

Ring Fencing – UK ring-fencing of retail operations

Brexit – EU business to be conducted from within the EU27

Gulf – GCC accessing the international capital markets

Macro – Strong GDP and trade growth

Infrastructure – Infrastructure investment (e.g. Belt & Road Initiative)

RMB – Continued internationalisation

Macro – US$ rate rises and GDP growth across North America Free Trade Agreement (NAFTA)

Trade – NAFTA renegotiation

US outbound – continued US international expansion

Pivot to Asia – continue re-deployment of resources and investment

Belt and Road Initiative – capture opportunities in 44 BRI countries within HSBC footprint

RMB – maintain market leading position Pearl River Delta – continue expansion into Pearl

River Delta, China Securities JV

UK – Implement ring-fencing Continental Europe – HSBC France as the hub

to win business post-Brexit MENA – support Gulf countries to diversify their

economies beyond oil and gas

US outbound and inbound – continue growth in serving US clients in Asia and Europe and MENA

Canada – capture opportunities from investment Mexico – continue progress on turnaround LATAM – Brazil new bank license to serve

multinationals

Full bank presence in US, Canada and Mexico

Strong UK, Continental Europe & Middle East

Unrivalled position in Asia

23

31

Historically stable revenue growth and market share gainsFinancing and Advisory - Profile and track record

1. Includes certain products in Global Banking before revenue sharing agreements with Global Markets and other businesses. Figures exclude Credit and Lending2. HSBC internal client MI3. Source: Dealogic, based on Volumes4. HSBC rank and % share is yoy as at 31st December 2016 5. Data comparison from 1995 onwards

DCM, ECM, Advisory, IRG, Credit and Equity financing revenue growth1

Revenue, US$bn

With positive momentum in a number of strategic areas2

2014

+6% CAGR

2016

24

With market share gains in key products3,4,5

Global DCM

Best ever rank

EMEA M&A

Best rank since 2009

Global and Asia ex JP/AU

G3 issuance

Best rank (equalled 2014)

and Maintaining #1 position

China outbound M&A

Best rank since 2003,

Highest market share since

2010

Emerging markets cross

border M&A

Best ever rank

EMEA leveraged loans

Highest market share,

Best ever rank

Asia Pacific loans


Asia ex JP/AU loans


Foreign issuers in US

Highest market share, best

ever rank

Technology

client revenues

MENA

client revenues

20162014

+9% CAGR

+6% CAGR

32

Well placed to continue to grow share of client event walletFinancing and Advisory - Outlook

1. Source: BCG Analysis. Investment banking revenue forecast

Industry revenue forecast1

US$bn

Continued growth in Asia

Fragmentation in European

capital markets (eg Brexit)

Growth in infrastructure development opportunities

Shift from international trade growth to intra-regional growth

Growth in sponsor activity

2020F2016

Trends

+3% CAGR

25

Initiatives

Regions1

Asia: Maintain leadership

– Grow assets in the Pearl River Delta

– Retain leadership in Investment Banking revenues in Hong Kong

– Invest in ASEAN to grow market share and improve returns

– Capitalise on the Belt and Road Initiative

Be the leading international bank in key network markets (e.g. Korea, Japan etc.)

North America: Capitalise on international trade flows, both into and out of North America

EMEA: Invest in key growth areas

– Well placed to continue to serve clients post-Brexit

– Improve returns across Europe

– Retain leadership position in MENA

Sectors3

Continued focus on building out our market shares on sector by sector basis, including for example:

FIG: leverage extensive Financial Institution client base to grow revenues

Financial sponsors: Grow market share of large scale financings and associated event fees

Technology: Continued investment in deepening market share across event and transaction banking

Products2

Loans: Top 3 market share in target markets in Europe and Asia with increased share in Americas

– Grow market share with global financial sponsors

DCM: Top 5 globally

– Increase sales of derivatives solutions

M&A: Leading China outbound advisory

– Maintain focused teams in each hub to service clients across the Group

ECM: Achieve top 3 position in Hong Kong and ASEAN

– Continued growth in EMEA market share

– Targeted growth in Americas

– Full service but focused teams in each hub to service clients across the Group

33

Progress in SectorsCase study: Global Chemicals sectors

Financing and Advisory

1. EXTEL 2016 and 2017 – Emerging EMEA Chemicals /Industrials Rankings

26

Supported by

best in class

research team1Acquisition financing Capital markets Advisory

Jun 2017

EUR26.9bn

Financial Advisor to

AkzoNobel in relation to

the unsolicited approach

from PPG Industries

(aborted by PPG)

Financial Advisor

Oct 2016

EUR350m

Disposal of graphite

electrode business of

SGL Group to Showa

Denko

Joint Financial Advisor

Dec 2015

US$3.2bn

Sale of Dow’s stake in

MEGlobal to EQUATE

Sole Financial Advisor

Apr 2017 (Announced)

US$2.1bn

Acquisition of Williams

Partners olefins facility

Sole financial advisor

Feb 2016

US$46.3bn

Recommended public

offer for Syngenta AG

Lead Financial Advisor

Jun 2016

Undisclosed

Sale of Coventya to

Silverfleet Capital

Sole Financial Advisor

Feb 2017 (Announced)

US$2.2bn

Sale of Cristal’s TiO2

businesses to Tronox Ltd

in return for cash and a

24% stake

Financial Advisor

Feb 2016

US$20.0bn

Acquisition facility

Global Coordinator and

Underwriter

Apr 2017

EUR0.7bn & US$1.2bn

Refinancing of

Acquisition Term Loans

Bookrunner/Joint Lead

Arranger/ Left-Lead

Arranger

Apr 2017

US$2.1bn

High yield bonds in

relation to Williams

Partners olefins facility

acquisition

Joint Active Bookrunner

Oct 2016

US$2.25bn

Inaugural bonds offering

Lead Manager and

Global Coordinator

Aug 2016

EUR1.9bn

3-tranche bond issue

Joint Bookrunner

Perfor. Materials

Nov 2016

EUR4.0bn

Mandatory Convertible

Co-Bookrunner

Nov 2016

SAR600m

Rights issue

Adviser/Lead

Manager/Underwriter

EM EMEA Chemicals

#1 Team

2017

Apr 2017

US$2.1bn

Acquisition bridge

financing

Sole initial bridge

provider

Sep 2016

US$56.9bn

Acquisition facilities for

the proposed acquisition

of Monsanto

Underwriter

Dec 2015

US$6.0bn

Bridge loan for the

acquisition of MEGlobal

Underwriter, Bookrunner,

MLA

EM EMEA Chemicals

#2 Team for Continental Europe2016

EM EMEA Chemicals

#1 -Sriharsha Pappu

2017

Feb 2017

US$2.1bn

Acquisition facilities for

The Carlyle Group’s

acquisition of Atotech

Joint Lead Arranger/Joint

Bookrunner

Aug 2015

US$5.8bn

Bridge loan for the

acquisition of Cytec

Mandated Lead Arranger

Nov 2015

US$1.6bn 144A/Reg S

Dual Tranche

EUR1.0bn Hybrid bond

Active Joint Bookrunner,

Joint Global

Coordinator

EM EMEA Chemicals

#3 – Nick Webster

2017

Jun and Sep 2016

EUR3.0bn 5-tranche

bond

US$4.5bn 5-tranche

bond

Bookrunner

Oct 2016

EUR3.3bn

Rights issue

Joint Bookrunner

Dec 2015

US$12.0bn

Bridge loan for the

acquisition of Air Gas

Mandated Lead Arranger

Ongoing

Financial Advisor to

AkzoNobel in relation to

the separation of

Specialty Chemicals

Financial Advisor




Appendix

Introduction

Q&A

Break


Lunch

Outlook3

2

9:35AM – 9:40AM

11:20AM – 11:45PM

10:20AM – 10:40AM

9:40AM – 10:00AM

11:45PM – 1:00PM

11:00AM – 11:20AM

10:00AM – 10:20AM

10:40AM – 11:00AM

35

Historically strong revenue and deposit growth enabled by key deals and recognised by industry awards

Global Liquidity and Cash Management – Profile and track record

Note: Figures may not add due to rounding1. As disclosed in Management View of Adjusted Revenue in the HSBC Holdings plc Annual Report and Accounts 2016. Americas include US, Canada and Latin America2. Revenue included for both CMB and GB&M customers as disclosed in Management View of Adjusted Revenue in the HSBC Holdings plc Annual Report and Accounts 2016 3. Growth in customer deposits partially offset by reductions in non-operational balances. Based on average YE deposits. Total GB&M customer accounts, on an adjusted basis, were US$256bn in 2016 and US$261bn in 20144. 2017 Greenwich Associates Survey; Euromoney Cash Management Survey 20165. Global Liquidity and Cash Management internal management information6. HSBC internal client MI

Facts and Industry Awards4

2016

Track Record2

Revenue, US$bn Deposits3, US$bn

1.7 2.0

20162014

5.7

Total,

CMB +

GB&M

6.3

2016

c.190

2014

c.150

c.450 c.500

Consolidation of banking across the Middle East region to drive greater operational efficiency, economies of scale and optimise liquidity to aid greater working capital management

Customer Examples

2016

Product suite1

2016, Revenue %

Balanced geographical footprint1

2016, Revenue %

Americas

Asia

MENA

EuropeNet Fee

Income

Net Interest

Income

Others +12% CAGR+7% CAGR

4.2bn5: Volume of Payments processed annually

US$425tn5: Value of Payments processed annually

Client revenue: Cross-border 76% and In-country 24%6

Best Global Cash Manager for financial and non-financial institutions (#1) by Euromoney

Recognised by Greenwich Associates as the #1 Cash Management provider for large corporates in Asia

27

HSBC assisted eBay invest its surplus cash in a range of investment

options, ensuring excess liquidity was optimised, banking fees were

reduced, and time was freed to enable the Treasury team to focus on

other strategic initiatives.

36

Continue to be leading provider of Liquidity and Cash Management solutions globally for our customers

Global Liquidity and Cash Management - Outlook

1. Source: BCG Analysis; Payments industry revenue forecast


US$bn

Initiatives

Geographies

Clients

1

2

Interest rate rises

Increasing FDI flows, in particular

from Asia to developed markets

Accelerating innovation from

Digitisation and the FinTech

revolution

Fragmented market creates

opportunities for global scale

players to consolidate and grow

market share

Brexit offers an opportunity to

increase market share in Europe

Extend proven coverage model to better penetrate key corridors (e.g. Asia to US,

Europe to US)

Further investment in ASEAN and PRD, in order to retain our #1 Asiamoney

Offshore RMB ranking

Continue to leverage the GLCM dedicated staff in 52 to countries to better

penetrate opportunities from corporates expanding abroad

Grow our stable deposit base

Leverage strong Continental Europe proposition to maximise post-Brexit

opportunities

Investments in Digital3

2020F2016

Maintain and build market leading Global Payment capabilities through

partnership with FinTechs

Investment in digital to deliver step change in client experience, including

enhanced self service capabilities

Trends

+5% CAGR

28

37

Trade is pivotal to the value of HSBC’s networkGlobal Trade and Receivables Finance - Profile and track record

1. HSBC Management View of Adjusted Revenue as reported in the 2016 HSBC Holdings plc Annual Report and Accounts 2. On an adjusted basis for GB&M customers

Global Trade Finance Solution

Case Study

702693

20162014

Revenue1, US$m

GTRF GB&M Track Record

2016, Revenue, %

With focus in Asia2

MENA

Asia

EuropeAmericas

Structured a receivables

finance facility in the US

with HK

US

HK

Structured a receivables

finance facility in MENA

UK

HSBC Balance sheet

Buyer

Saudi

Arabia

Microsoft

Key Characteristics

• Enabled Microsoft to extend payment terms whilst mitigating concentration risk on key partners

• HSBC’s solution combined use of several booking centres and of credit insurance to maximise efficiency of capital

29

38

Sustained revenue growth, RWA reduction and market share gainsGlobal Markets – Profile and track record

1. HSBC internal client MI2. GB&M adjusted revenue based on the 2016 HSBC Holdings plc Annual Report and Accounts. Numbers may not add due to rounding3. Source: Coalition. Peer group: Bank of America Merrill Lynch, Barclays, BNPP, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley, Société Générale and UBS. Coalition results are based upon HSBC’s

product taxonomy and include all Institutional clients and Corporates with a turnover of greater than US$1.5bn4. Based on reported revenue. Universal Banks comprise: JP Morgan, Citi, Bank of America, Barclays, BNPP, Deutsche Bank and Societe Generale. Investment Banks comprise: Goldman Sachs, Morgan Stanley, Credit Suisse and UBS. Dec16

spot rate was used to translate European peers results to US$5. Comprising Credit, Rates and Foreign Exchange revenue within Global Markets6. Gross RWA reductions on an adjusted basis

Equities

15% Credit

12%

Rates

32%FX42%

Client profile1

2016, Revenue %

Product suite2

2016, Revenue %

Track Record

Corporate

Retail

Other Hedge

Funds

Asset

Managers

Insurance

Banks

Market position3

2016, Revenue %

Global Markets as a % of group4

2016, Revenue %

6.86.15.5

2016

+11% CAGR

20152014

Revenue2, US$bn

RWAs6

Market Share3,%

20152014 2016

c.-US$50bn

2016

+130 bps

20152014

Delivering solutions, financing, emerging market and network to

corporate and institutional clients

12% 15% 15%

6%16%

2%

HSBC Investment

Banks

Universal

Banks

FICC5Equities

FX Rates Credit Equities

Asia

EMEA

Americas

Top 3 Top 6 Top 10 11+

30

39

Defined plans to continue growth momentumGlobal Markets – Outlook


US$bn

Trends

Initiatives

Client Financing and Solutions opportunities1

Post-crisis regulatory changes near

finalisation except Fundamental Review of

Trading Book

Re-pricing of balance sheet and capital

commitment

Increased focus on client relationships and

solutions

Polarisation of trading activities between

execution and financing / solutions

End-to-end digitalisation and rise of FinTech

Client opportunities including global trade

growth and AUM growth

Client challenges including fees, regulation,

industry transformation

Grow higher margin businesses aligned to HSBC strengths

Credit – leverage our franchise for origination opportunities and build further

capabilities in investment grade, high yield, exchange-traded funds, asset backed

securities, loans and repo trading

Financing and Solutions - leverage balance sheet, capital and diverse franchise

(CMB, Banks, Insurers, Hedge Funds, Sponsors) to originate, transform and

finance pools of assets or risks for redistribution

Digital for clients3

Investment in digital to enhance efficiency and better serve our clients

eTrading as a service

Business intelligence and analytics to sales and clients deliver the “power of

the franchise”

Leveraging cloud computing and FinTech innovation

Growth aligned with HSBC’s strengths in Emerging Markets2

Delivering market access and notably Asian network

Growing our greater China best in class offering including RMB, market access

and China Securities JV

Positioned to capture internationalisation of capital markets in the Gulf

countries

Expand and complete LATAM franchise

2020F2016

1. Source: BCG analysis. Fixed Income,Currencies, and Commodities (FICC) and Equities industry revenue

+2% CAGR

31

40

Market share gains enabled by leadership position in Asia and Middle East

HSBC Securities Services – Profile and track record

1. HSBC internal client MI2. GB&M adjusted revenue based on the 2016 HSBC Holdings plc Annual Report and Accounts. Revenue type: Fee-based income includes Funds and Custody, Issuer Services, Foreign Exchange and Securities lending 3. AUC figures above on a constant currency basis. On a reported basis, AUC for 2016 is US$6.3tn; 2015 is US$6.2tn and US$6.4tn for 20144. RQFII: RMB Qualified Foreign Institutional Investor5. Source: EY and HSBC internal analysis

Track record

US$bn, Revenue2

2016

1.6

2015

1.6

2014

1.5

2016

6.3

2015

6.1

2014

5.9

US$tn, AUC32016, Revenue %

Client base1

2016, Revenue %

Product Suite2

2016, Revenue %

Geography1 Revenue type2

2016, Revenue %

BlackRock - RQFII4 custodian bank, helping US investors buy

domestic Chinese securities for the first time

Credit Suisse - Provider of equity markets post-trade

processing in Australia

Key deals

Key awards 2017

Accessing c.90 markets worldwide Ranked #6 globally by AUC5

Core product for Financial Institutions Stable and recurring revenue

+3% CAGR +3% CAGRHedge

FundsSovereign &

Public Sector

Insurance

Asset Managers

& Pension Funds

Banks &

Broker dealers

Issuer services

Fund

services

Custody

Americas

Europe

MENA

Asia

Net Interest

income

Fee based

income

32

Asia MoneyBest for offshore RMB fund

services

AsianInvestor• Asset Services Provider of the Year

• Bank of the Year for Cross-Border Custody

• Global Custodian of the Year Mutual Funds

Global CustodianInnovation in Proxy Voting

41

Invest to capture market growth, automate our platforms and deliver enhanced client experience

HSBC Securities Services – Outlook

1. Source: BCG analysis. Custodian Revenue based on the top 10 global custodians2. API: Application Programming Interfaces

2016 2020F

Initiatives

Invest in Digital & Data

Increased investment in digital & data programmes

Improve client experience through APIs2 and enhanced data channels providing greater insights to client’s portfolios

Leverage robotics and ‘Artificial Intelligence’ to drive automation

Grow the asset managers and asset owner sectors

Deliver next generation integrated custody and funds platforms

Broaden asset classes (e.g. ETFs, alternatives)

Sales & Commercial excellence by fully leveraging GB&M relationships

1

2

Grow the value of our business by leveraging our franchise

New middle office outsourcing services to banks and broker dealers

Improve Issuer Servicing capabilities & connectivity to better support our Financing & Origination business

Enhance collaboration with HSBC Asset Management, Private Banking and Insurance to leverage our universal banking model

4

Interest rate rises

Compression of industry margins

Increasing client demand for digital services

Asset growth in asset managers and owners sectors with a drive to diversify asset classes

Increased regulatory focus on investor protection and asset safekeeping rules


US$bn

Trends

Strengthen our network

Evaluate options to expand our footprint e.g., Europe

Invest in high growth markets e.g. China, Indonesia

Capture more cross-border flows in/outbound to Asia and EMEA

3

+3% CAGR

33

42

10+ Investments in technology start

ups to date

Across four key themes

Invest in digital and innovation for efficiency and growthDigital – Outlook

34

Security

Data and

Artificial

Intelligence

Open Banking

and Networks

Operational

Efficiency

Strategic Investments and PartnershipsClient and Market Connectivity

Transform transaction banking browser

and mobile:

• New User Interface & virtual assistant

• New authentication & TouchID on

Mobile

Investing in our execution platform:

• Integrated customisable execution

platform, from pre-trade, trade

through to post-trade

HSBC Evolve

Transform transaction banking host to host connectivity:

• New user interface

• More file formats




Appendix

Introduction

Q&A

Break


Lunch

Outlook3

2

9:35AM – 9:40AM

11:20AM – 11:45PM

10:20AM – 10:40AM

9:40AM – 10:00AM

11:45PM – 1:00PM

11:00AM – 11:20AM

10:00AM – 10:20AM

10:40AM – 11:00AM

44

Further scope to improve RoRWA to greater than 2.5%Outlook


>2.5%

RoRWA

2016

1.8%

RoRWA

Outlook2

GB&M RoRWA

%

Revenue Operating Costs RWAs

35

Mid single digit

revenue growth

driven by key

trends and

business initiatives

Continue

disciplined

approach to costs

to achieve

positive jaws

Continued

discipline capital

allocation to

achieve a further

US$ 20bn+

reduction1

45

Revenue – Mid single digit growth driven by macro and competitive advantages

Outlook

1. On an adjusted basis. Graphs not comparable due to account restructures and FX difference2. On an adjusted basis, as shown in the Investor Update 2015 Slide 12. Relates to 2015 definition of client-facing GB&M. Figures for 2011-2013 have not been adjusted for disposal of Brazil and realignment of customers between

Global Businesses

Economic growth

Interest rate rises

Banking Industry wholesale revenue growth

1 Macro factors

Deepen and broaden client relationships - more

products in more countries

Continue market share gains

2 Monetise competitive advantages

Financing

Grow financing business e.g. Sponsors and

Credit

Emerging Markets

Asia – Infrastructure (Belt & Road), China

Securities JV, Pearl River Delta expansion

Middle East – support Gulf countries to diversify

their economies beyond oil and gas

Digital

Invest in digital in Global Liquidity & Cash

Management, Global Markets and Securities

Services to improve client experience

3

Outlook2016

14.9

2015

14.6

2014

13.6

GB&M revenue1

US$bn

Drivers

Investing for future growth

Mid single

digit CAGR

2014201320122011

c.6% CAGR

As per Investor update 20152

36

c.5% CAGR

46

Costs - Continue disciplined approach to costs to achieve positive jawsOutlook

1. On an adjusted basis as reported in the 2016 HSBC Holdings plc Annual Report and Accounts2. 2015 Investor Update US$1.1bn target included BSM and Legacy which is now part of Corporate Centre3. From 1Q17 onwards, the foreign currency translation differences related to significant items were presented as a separate component of significant items. This figure is based on the

updated presentation. The effect of FX on significant items is US$0.3bn

2014 Adjusted

for FX

8.53

Positive jaws

OutlookCost SavesInflation and

Investments

2016

8.9

Cost SavesInflation and

Investments

(Regulatory

and Growth)

<2% CAGR

Cost walk1

US$bn

63%CER

Direct costs

Indirect costs59%

37

Run rate cost

saves c.US$0.5bn

• On track to deliver US$1.1bn in

run rate savings by end 20172

Effect of FX on significant items

47

Capital – Continue disciplined capital allocation to achieve a further US$ 20bn RWA reduction

Outlook

GB&M Risk Weighted Assets

US$bn

35096

46

39

59

171

OutlookGrowth

and other

movements

2016Growth

and other

movements

20141

300

32

Gross

Reduction

• Managing client profitability

• Further improved data quality

and models

663729External

Assets2,

US$bn

1. On an adjusted basis2. GB&M External assets after derivative netting. For further details see appendix3. Gross RWA reduction4. June 2015 Investor update gross reduction of US$140bn updated to US$100bn as legacy credit has moved to Corporate Centre, re-segmentation and adjusted at 1Q17 FX rate

Gross

Reduction

38

Target for 2017: gross

reduction of US$100bn4

Further US$20bn+

reduction3

Credit risk

Counterparty

credit risk

Market risk

Operational risk

48

Global Banking & Markets is well positioned to continue to grow whilst improving returns

Outlook

Market trends

‒ Positive growth for the medium term

‒ Improving returns

Proven track record in execution

‒ Revenue growth: distinctive competitive

advantages and market share gains

‒ Improved returns: track record in reducing

RWAs whilst maintaining revenue momentum

‒ Historical stable and recurring revenue

Defined plans to capture growth whilst keeping

tight cost management and further RWA

reduction

Returns

Capital

Operating

Costs

Re-affirming Investor commitments

Revenue

RoRWA > 2.5%2

Further US$20bn+

RWA reduction1

Positive Jaws

Mid single digit growth

39





Appendix

Introduction

Q&A

Break


Lunch

Outlook3

2

9:35AM – 9:40AM

11:20AM – 11:45PM

10:20AM – 10:40AM

9:40AM – 10:00AM

11:45PM – 1:00PM

11:00AM – 11:20AM

10:00AM – 10:20AM

10:40AM – 11:00AM

52

RoRWA 2014 to 1Q 2017Appendix – Track record

1. As disclosed in the 1Q17 HSBC Earnings release. 1Q17 has been annualised and on a 2pt Average. Revenues include LICs

2.3%0.3%0.7%

1.5%

RoRWA

1Q 20171

RWAsCosts

-0.2%

Revenue

+ LICs

RoRWA

2014

Global Banking & Markets RoRWA

%

40

53

Costs 2014 to 2016

Note: Numbers may not add up due to rounding1. Presented on an adjusted basis to exclude the effects of currency translation and significant items 2. As reported in the 2016 HSBC Holdings Annual Report and Accounts3. From 1Q17 onwards, the foreign currency translation differences related to significant items were presented as a separate component of significant items. The adjusted operating expenses figures have been updated to reflect this

change

Update on progress1

0.3

8.2

8.5

20143

8.9

2015

9.0

2016

GB&M cost reductions

US$bn, run-rate basis

GB&M Adjusted Operating Expenses1

US$bn FX related to significant items

Adjusted Operating Expenses2

Appendix – Track record

1.1

Target 2017Plan for 2017Year End 2016

41

54

RWAs 2014 to 2016

1. RWAs on an adjusted basis, stated at 4Q16 FX rate 2. As reported

RWAs1 Cumulative Gross RWA reductions2

10096

82

73

63

57

32

19

4

2Q151Q15 Target

4Q17

4Q163Q162Q161Q164Q153Q15

Appendix – Track record

46

96300

350

4Q16Growth & other

movements

Reduction4Q14

Update on progress1

42

Total Gross RWA reductions US$96bn of which:

• Global Banking c.US$45bn

• Global Markets c.US$50bn

US$bnUS$bn

55

Balance sheet assets of US$663bn, smaller than most major peersAppendix – Track record

1. 2014 GB&M assets as disclosed at June 2015 Investor day for GB&M Client Facing assets (includes Brazil and FX)2. Includes transactions where the counterparty has an offsetting exposure with HSBC and a master netting or similar arrangement is in place with a right of set off only in the event of a default, insolvency or bankruptcy, or the offset

criteria are otherwise not satisfied and non-cash collateral received in respect of these transactions. The majority of the HSBC Group total relates to GB&M 3. Peer estimated CIB assets calculated as segmental period end assets offset by derivative netting, methodology as follows i) financial data sourced from peer published financial disclosures, ii) assumptions made as to the

equivalent peer segments, iii) assumptions made as to the allocation of the peer derivative balances and respective netting to the GB&M equivalent segment and iv) European peers converted at the Dec 2016 spot FX rates

European

Bank B

European

Bank A

US

Bank C

US

Bank B

US

Bank A

Peer estimated CIB assets3

US$bn

925

2016 GB&M

External

Assets

2014 GB&M

assets1

2016 GB&M

assets

663

Derivatives

netting2

(262)

Trading assets

Other

Loans and advances

Derivatives not set off

729

GB&M assets

US$bn

43

56

PresentersAppendix

Samir Assaf

Chief Executive Officer


Thibaut De Roux

Global Head of

Markets

Robin Phillips

Co-Head of

Global Banking

Matthew Westerman

Co-Head of

Global Banking

Diane Reyes

Global Head of Global

Liquidity & Cash Management

Gerard Mattia

Chief Finance Officer


Richard O’Connor

Group Head of

Investor Relations

Cian Burke

Global Head of

HSBC Securities Services 44





57

Basis of PreparationAppendix

45

Assumed no changes from 2014 in

‒ IFRS accounting rules

‒ Regulatory capital / RWA rules

‒ Common law

Figures are presented on an adjusted basis and exclude the effects of significant items, currency translation and acquisitions and disposals

Assumed that where targeted reduction on RWAs require regulatory approvals (e.g. model changes), these will be received

Forward interest rate curves as at 31 March 2017

58

Definitions (1/4)Appendix

46

Adjusted performance

Adjusted performance excludes the year-on-year effects of foreign currency translation differences and significant items which distort the year-on-year comparison of reported results. The term significant items collectively describes the group of individual adjustments excluded from reported results when arriving at adjusted performance and which management and investors would ordinarily identify and consider separately when assessing performance in order to better understand the trends of the business.

ASEANAssociation of Southeast Asian Nations; member states include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam

AuC Assets under Custody

AuM Assets under Management

BCG Boston Consulting Group

BSM Balance sheet management

CAGR Compounded Annual Growth Rate

CCRCounterparty Credit Risk - Counterparty credit risk, in both the trading and non-trading books, is the risk that the counterparty to a transaction may default before completing the satisfactory settlement of the transaction

CER ratio Cost Efficiency Ratio - Total operating expenses divided by total revenue

CET1

Common Equity Tier 1: CET1 Capital - The highest quality form of regulatory capital under Basel III that comprises common shares issued and related share premium, retained earnings and other reserves excluding the cash flow hedging reserve, less specified regulatory adjustments. CET1 Ratio – A Basel III measure, of CET 1 capital expressed as percentage of total risk exposure amount

China Mainland China

Client facing GB&MAs defined in 2015 Investor update as the GB&M structure in 2015 excluding Associates, Legacy Credit & Balance Sheet Management

Client revenueDiffers from reported revenue. Client revenue relates to client income which includes total income from GBM clients relationships before synergies with other global businesses and excludes internal costs of funds.

CMB Commercial Banking

CRDIV

Capital Requirements Directive IV - A capital adequacy legislative package issued by the European Commission and adopted by EU member states. CRD IV package comprises a recast Capital Requirements Directive and a new Capital Requirements Regulation. The package implements the Basel III capital proposals together with transitional arrangements for some of its requirements. CRD IV came into force on 1 January 2014

59


47

CTBChange the Bank - defined as costs that drive change (excluding transformation), e.g. regulatory changes. Once a programme is implemented, ongoing running costs are no longer classed as CtB

CVACredit Valuation Adjustment - An adjustment to the valuation of OTC derivative contracts to reflect the creditworthiness of OTC derivative counterparties

DCM Debt Capital Markets

Derivative nettingEither where the counterparty has an off-setting exposure with HSBC but offsetting exposure with HSBC but offsetting criteria are not satisfied or where collateral (cash or non-cash) has been received in respect of these transactions

DVA Debit Valuation Adjustment

EMEA Europe Middle East and Africa as per Dealogic definition

Europe Europe geographic segment

Exit run-rate cost Run-rate as of 31st December including impact of inflation, investment and full effect of savings

Footprint HSBC Presence (countries)

FTE Full-Time Equivalent staff

FX Foreign Exchange

FX related Settlement and provisions in connection with FX investigations

GB Global Banking

GB&M Global Banking and Markets

GCC Gulf Cooperation Council

GDP Gross Domestic Product

GLCM Global Liquidity and Cash Management

Global Businesses Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, Global Private banking

Global FunctionsRisk and Compliance, Finance, Human Resources, Communications, Marketing, Legal, Internal Audit, Sustainability,

Company Secretary, Strategy & Planning, HSBC Technology & Services (HTS)

60


48

Global Standards

The adoption and deployment the highest or most effective financial crime controls everywhere that we operate. Global

Standards include policies set out these controls for anti-money laundering (‘AML’) and sanctions. They are our Global

Standards. We are transforming how we detect, deter and protect against financial crime through the deployment of

Global Standards, which govern how we do business and with whom

GRB Global Relationship Banker

G-SIB Global Systemically Important Bank

GTRF Global Trade and Receivables Finance

HSS HSBC Securities Services

Inbound revenue Client revenue booked in Country A where the primary relationship is managed outside of Country A

Investment banks Investment banks comprise Goldman Sachs, Morgan Stanley, Credit Suisse and UBS.

JAWsPercentage growth in net operating income before loan impairment charges and other credit risk provisions less

percentage growth in total operating expenses

JV Joint Venture

LATAM Latin America

Legacy

A portfolio of assets comprising Solitaire Funding Limited, securities investment conduits, asset-backed securities

trading and correlation portfolios and derivative transactions entered into with monoline insurers. Previously referred to

as “Legacy Credit”

LICs Loan Impairment Charges and other credit risk provisions

MENA Middle East and North Africa

Mid Market Mid Market Enterprise

NAFTA North American Free Trade Agreement

Outbound revenueClient revenue relating to clients where the primary relationship is managed in Country A, but the revenue is booked outside of Country A

61


49

Pearl River DeltaPearl River Delta is located in Guangdong Province, Mainland China. It includes 9 prefectures: Guangzhou, Shenzhen, Foshan, Dongguan, Zhongshan, Huizhou, Zhuhai, Jiangmen and Zhaoqing

PRA Prudential Regulation Authority

RBWM Retail Banking and Wealth Management

ReportedReported view of performance is determined on an IFRS basis as reported in HSBC's annual report and accounts and other financial and regulatory reports

ROEReturn on average ordinary shareholders equity, defined as profit attributable to ordinary shareholders of the parent company divided by average ordinary shareholders equity

RoRWA

The metric, return on risk weighted assets (‘RoRWA’), is defined as profit before tax divided by average risk weighted assets (‘RWAs’). RWAs have been calculated using FSA rules for the 2010, 2011 and 2012 metrics. In all cases, RWAs or financial metrics based on RWAs for geographical segments or Global Businesses include associates, are on a third party basis and exclude intra-HSBC exposures.

RQFIIs Renminbi Qualified Foreign Institutional Investor Scheme

RTBRun the Bank is defined as costs that are required to keep operations running, maintain IT infrastructure and support revenue growth

RWA Risk Weighted Assets

Strategic corridors The largest and fasting growing corridors connected to HSBC’s priority markets

Synergies Benefits from shared resources and product capabilities

TLAC Total Loss-Absorbing Capacity see MREL

TMT Telecommunications Media and Technology

Transaction banking products

GTRF, GLCM, and HSS Products

Universal banking Retail, wholesale and investment banking services in one banking group

Universal banks Comprises JP Morgan, Citi (excluding Private Bank), Bank Of America, Deutsche Bank, Barclays and BNPP

global banking and markets investor update 2017 - hsbc · banking industry wholesale revenues...

Documents